Three questions that decide almost everything
European VAT feels impenetrable when sellers try to learn it as a body of rules. It gets manageable once you treat it as three questions asked in order, because the answers settle most of what follows.
- Where is your business established? An EU-established company, a UK company and a company based outside both are treated very differently, especially on thresholds. Businesses that aren't established in a country usually get no threshold there at all.
- Where is the stock at the moment of sale? Goods already in the UK, goods already in the EU and goods imported at the point of sale fall under different regimes. This is the question that decides where you have to register.
- Who is the customer? Consumers and VAT-registered businesses are handled differently. Most Amazon sales are to consumers (B2C), so that is the assumption throughout this guide.
Everything below builds on those three. When a VAT question feels impossible, it is usually because one of them hasn't been pinned down.
The figures here reflect the framework as it has worked since the 2021 reforms, and thresholds do change. Use them to understand the structure, then confirm current values with an accountant who handles cross-border ecommerce before you file anything.
Where your stock sits
If you remember one principle, make it this. Storing goods in a country generally creates a VAT registration obligation there. Selling into a country doesn't, on its own. Storing in it does.
That is why FBA changes the picture so sharply. Selling to a German customer from a warehouse in Poland is a cross-border sale you can report through a single EU return. Storing units in a German fulfilment centre gives you a local taxable presence, and Germany expects a German registration. The customer is the same in both cases, and the tax treatment is different.
So switching on any programme that moves your inventory across borders is a tax decision as much as a logistics one. Pan-EU FBA cuts fulfilment fees and shortens delivery times by putting stock close to buyers, and it does that by moving your goods into several countries, each of which then wants a registration. Sellers who turn it on for the fee saving without registering can build up liabilities in several countries at once, and those usually come to light later with interest and penalties added.
Programmes that keep stock in one country, sometimes called the European Fulfilment Network or similar, avoid this by shipping cross-border from a single location. They cost more per unit and keep your registration footprint small. For a seller testing a new market, that is often the right trade. Once volume justifies it, register properly and take the fulfilment savings. If you're deciding which markets to open first, our marketplace guides cover the commercial side country by country.
In Seller Central you can see where your stock is going before it causes a problem. The Pan-European FBA settings page shows which countries you are enrolled for, and the FBA inventory reports show stock by fulfilment centre country. Check those against your list of VAT registrations whenever you change programme settings. If a country appears in the inventory report and not on your registration list, you have a gap.
The UK since 2021
The UK left the EU VAT system at the start of 2021 and now runs its own regime. In broad terms it works like this.
UK-established businesses have a registration threshold based on taxable turnover, which has stood at 90,000 pounds over a rolling 12 months. Below it registration is voluntary, and plenty of sellers register early anyway so they can reclaim input VAT on stock and Amazon fees.
Businesses established outside the UK get no threshold. If you sell goods that are already in the UK to UK customers, the obligation starts more or less immediately. HMRC's guidance says an overseas business must register if it supplies goods or services to the UK, or expects to in the next 30 days. Sellers often assume the 90,000 pound figure applies to them, send stock to a UK fulfilment centre, and trade for a year before finding out it never did.
Imports are split at 135 pounds. For consignments at or below that value sold to UK consumers through a marketplace, Amazon accounts for the VAT instead of it being collected at the border. Above 135 pounds, import VAT and any duty are charged at importation in the normal way, so someone has to be the importer of record and someone has to pay.
You also need a GB EORI number to import goods into the UK at all. The application is simple and free, and not having one is a common reason a first shipment sits at the border while the freight agent waits for paperwork.
The EU, OSS and the 10,000 euro threshold
The July 2021 reforms replaced separate distance selling thresholds for each country with a simpler system for cross-border sales.
For businesses established in the EU there is now one EU-wide threshold of 10,000 euros, covering cross-border B2C sales of goods and certain services. Below it you can keep charging your home country's VAT rate. Above it you charge the rate of the customer's country, and the One Stop Shop (OSS) lets you report all those sales on one quarterly return filed in your own member state, rather than registering in every destination.
That is a real simplification, and it is also where confusion starts, because OSS is often described as a single EU VAT registration. It is a single reporting mechanism for cross-border sales, and it does nothing about stock.
So an EU seller using Pan-EU FBA needs both at once: local VAT registrations in every country where inventory is stored, because storage creates a local obligation, and OSS to report cross-border sales from those locations to customers elsewhere in the EU. Sellers who set up OSS and consider the job done are the ones who later receive assessments from tax authorities in countries they have never visited.
Businesses established outside the EU don't get the 10,000 euro threshold. It applies only to EU-established sellers.
IOSS and the 150 euro consignment rule
The Import One Stop Shop (IOSS) covers goods imported into the EU in consignments worth 150 euros or less. It exists because the old low value consignment relief was abolished, so VAT is now due on imported goods of any value, and collecting small amounts at the border is slow and unpleasant for everyone.
With IOSS you charge the destination country's VAT at the point of sale, the parcel clears customs without VAT being collected at the border, and you report everything on one monthly return. The customer pays a clear price at checkout and gets the parcel without a courier asking for a handling fee on the doorstep, which saves real money in refused deliveries and complaints.
Without IOSS, VAT is collected at import, usually by the carrier, who adds a clearance charge and asks the customer to pay before delivering. A good share of those parcels are refused, and the ones that arrive leave buyers unhappy about a bill they didn't expect.
Two practical points. Non-EU businesses usually need an EU-established intermediary to register for IOSS, which is a paid service. And the 150 euro limit applies per consignment, not per item, so bundling several products into one parcel can push a shipment over the line and out of the scheme.
IOSS only matters if you fulfil into the EU from outside it. If your goods are already in an EU fulfilment centre when the order is placed, the sale isn't an import and IOSS doesn't apply.
The temporary 3 euro customs duty from July 2026
Low-value imports used to be free of customs duty as well as being inside IOSS. That changed on 1 July 2026. The EU now charges a temporary flat customs duty of 3 euros on goods in consignments worth up to 150 euros sold by distance sale, whichever VAT scheme is used, IOSS included. The European Commission's guidance says it applies until 1 July 2028, after which normal duty rates are expected to apply.
The duty is counted per item by tariff classification, not per unit. In the Commission's example, five identical T-shirts in one parcel attract one 3 euro charge, while T-shirts and a watch in the same parcel attract two. For a seller shipping single low-priced items from outside the EU, that is a noticeable cost per order, and it is another reason to compare cross-border shipping with holding stock in an EU fulfilment centre. Check the current Commission guidance before you price, because the related handling fee and data requirements were still being finalised.
Where Amazon collects VAT for you
Marketplace deemed supplier rules move the VAT collection obligation onto Amazon in defined situations. That helps, and it is often misread as a general exemption.
Amazon generally accounts for the VAT in two cases: goods imported in consignments within the relevant low value threshold and sold to consumers through the marketplace, and goods already in the UK or EU sold by a seller not established there. In those cases Amazon calculates, collects and pays the VAT, and you see it in your settlement reports instead of collecting it yourself.
It doesn't remove your registration obligations. If you store goods in Germany, Germany still expects a German VAT registration and returns, even where Amazon accounts for the VAT on the sales. The registration exists because of the stock, and it is also how you reclaim import VAT and local input VAT. Sellers who see Amazon collecting and conclude they have nothing to file are usually wrong.
A related point is how Amazon's own fees are treated. If you give Amazon a valid VAT number for the relevant country, its selling fees are usually invoiced without VAT under the reverse charge, and you account for it on your own return. If you don't, VAT is added to the fees, and for a seller who could have reclaimed it that is money lost for good. It is one of the quieter reasons to register promptly. In Seller Central you add VAT numbers under your account settings, in the VAT information section of Account Info, one per country you are registered in.
A worked example: the same seller, three setups
To show how the three questions play out, take an illustrative US-based brand selling a 40 euro product into Germany and France. These are examples of the structure, not tax advice.
- Setup one: stock stays in the US and orders ship direct to EU customers. Each order is an import worth less than 150 euros. On Amazon, Amazon is generally the deemed supplier and accounts for that import VAT. If the brand also ships orders from its own website, it needs its own IOSS registration for those, which for a non-EU business means an EU intermediary and a monthly return. The temporary flat customs duty applies per item either way.
- Setup two: stock sits only in a German fulfilment centre, using a single-country programme. The brand needs a German VAT registration because of the stock. German sales are domestic. French sales are cross-border sales from Germany, and because the brand isn't EU-established, Amazon generally accounts for the VAT on those marketplace sales. The German registration and returns still have to be kept up.
- Setup three: Pan-EU FBA is switched on. Stock may now sit in Germany, France, Poland, Italy, Spain and others, and each storage country needs its own registration before the stock arrives.
The product and customers are the same in all three. The filing obligations come from where the stock is.
The expensive mistakes
These come up often enough to list one by one.
- Switching on Pan-EU before registering. The fee saving shows up straight away and the tax consequence arrives later, so the decision feels free at the time. Register first, then enable it.
- Assuming a threshold that doesn't apply to you. Businesses not established locally generally get no threshold in the UK and no 10,000 euro allowance in the EU. This catches sellers based outside Europe almost every time.
- Letting someone else be the importer of record. If a freight forwarder or supplier imports goods under its own details, you may not be able to reclaim the import VAT, because the right to reclaim belongs to the importer. That can cost thousands on a single container.
- Treating OSS as a substitute for local registration. It is covered above, and it is repeated here because it is the most expensive mistake on the list.
- Not giving Amazon your VAT number once you're registered. Your fees then carry VAT that you could have handled through the reverse charge.
- Forgetting to deregister when you stop. Closing a market without deregistering leaves filing obligations running, and nil returns nobody submits turn into penalties.
None of this is a reason to avoid European marketplaces. The EU and UK together are a very large opportunity, and once set up, compliance is mostly a recurring admin cost rather than a decision you keep having to make. The sellers who struggle are usually the ones who expanded first and read the rules afterwards, often because a fulfilment programme promised a fee saving with a tax cost nobody had priced.
Get advice specific to where your business is established, where you plan to hold stock and which countries you actually intend to sell into. That conversation costs far less than a back-dated assessment from a country where you didn't realise you had obligations.
Frequently asked questions
No, and this is the most costly misunderstanding in EU ecommerce. OSS lets you report cross-border B2C sales on a single return, but it doesn't cover holding stock. Once your inventory is physically stored in a country, that country generally requires a local VAT registration, OSS or not.
If your business is established outside the UK and you sell to UK customers, there is no registration threshold, so the obligation usually starts with the first sale. HMRC says overseas businesses must register if they supply goods to the UK or expect to in the next 30 days. UK-established businesses have a threshold, which has stood at 90,000 pounds of taxable turnover, though you can register voluntarily below it.
IOSS is the Import One Stop Shop, a scheme for goods imported into the EU in consignments worth 150 euros or less. You charge destination VAT at checkout and report it on one monthly return, instead of VAT being collected at the border. If you ship to EU customers from outside the EU, it usually speeds up delivery and makes the experience better for the buyer.
Broadly yes. Pan-EU FBA spreads your stock across fulfilment centres in several countries, and storing goods in a country creates a local VAT registration obligation there. Sellers who enable Pan-EU without registering first often build up back-dated liabilities in several countries.
In specific situations, yes. Under marketplace deemed supplier rules Amazon accounts for the VAT on imported consignments up to the relevant threshold, and on sales of goods already in the UK or EU where the seller isn't established there. It doesn't remove your own registration obligations where you hold stock.
No. IOSS is about VAT and still covers consignments up to 150 euros. The temporary 3 euro customs duty, in place from 1 July 2026 until 1 July 2028 according to the European Commission, is a separate customs charge on the same low-value goods, applied per item by tariff classification whatever VAT scheme you use. You may deal with both on the same parcel.
